First Look

First Look summarizes new working papers, case studies, and publications produced by Harvard Business School faculty.
Readers receive early knowledge of cutting-edge ideas before they enter the mainstream of business practice.
For complete details on faculty research, see our Working Papers section.

February 19, 2013

Facebook's Growing Threat To Apple And Google

More people now use Facebook's mobile app than visit the company's website. This recent change, according to professor Andrei Hagiu, is a harbinger of Facebook's growing position against Apple's and Google's platform strategies. "This is important," Hagiu writes, "because Facebook has now begun competing not just at the social network level, but also at the operating system level." Meanwhile, there is no Facebook killer on the horizon. Read Hagiu's piece in Wired magazine, How Facebook Can Totally Undermine Apple and Google in the Platform Games.

Rethinking The New Direction At J.c. Penney

New J.C. Penney CEO Ron Johnson started the job with a bang, totally upending the retailer's complicated pricing strategy and ending the many sales promotions that confused customers. A recently updated case captures Johnson as he revisits his "fair and square" strategy in light of disappointing sales. Read "J.C. Penney's 'Fair and Square' Pricing Strategy," written by Elie Ofek and Jill Avery.

Pondering Chile's Energy Future

Global climate change offers power companies many opportunities in the coming years, but challenges as well. In Chile, challenges facing Colbún, the country's second largest electricity generator, include problems with natural gas supplies, volatile oil prices, and pressure from collective activists. What should CEO Bernardo Larrain Matte do? Read "Colbún and the Future of Chile's Power," by Forest Reinhardt and Shon R. Hiatt.

— Sean Silverthorne

Publications

Labor Regulations and European Venture Capital

Authors:

Bozkaya, Ant, and William R. Kerr

Publication:

Journal of Economics & Management Strategy

Abstract

European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor market insurance mechanisms. Venture capital investors are especially sensitive to these labor adjustment costs. Nations favoring labor market expenditures as the mechanism for providing worker insurance developed stronger venture capital markets over 1990-2008, especially in high volatility sectors. In this context, policy mechanisms are more important than the overall level of worker insurance.

Luxembourg: A Sustainable Society Starts Here

Abstract

The New Patent Intermediaries: Platforms, Defensive Aggregators, and Super-Aggregators

Authors:

Hagiu, Andrei, and David B. Yoffie

Publication:

Journal of Economic Perspectives

Abstract

The patent market consists mainly of privately negotiated, bilateral transactions, either sales or cross-licenses, between large companies. There is no eBay, Amazon, New York Stock Exchange, or Kelley's Blue Book equivalent for patents, and when buyers and sellers do manage to find each other, they usually negotiate under enormous uncertainty: prices of similar patents vary widely from transaction to transaction, and the terms of the transactions (including prices) are often secret and confidential. Inefficient and illiquid markets, such as the one for patents, generally create profit opportunities for intermediaries. We begin with an overview of the problems that arise in patent markets, and how traditional institutions like patent brokers, patent pools, and standard-setting organizations have sought to address them. During the last decade, a variety of novel patent intermediaries have emerged. We discuss how several online platforms have started services for buying and selling patents but have failed to gain meaningful traction. And new intermediaries that we call defensive patent aggregators and super-aggregators have become quite influential and controversial in the technology industries they touch. The goal of this paper is to shed light on the role and efficiency tradeoffs of these new patent intermediaries. Finally, we offer a provisional assessment of how the new patent intermediary institutions affect economic welfare.

Corporate Social Responsibility Reporting in China: Symbol or Substance?

Authors:

Marquis, Christopher, and Cuili Qian

Publication:

Organization Science

Abstract

This study focuses on how and why firms strategically respond to government signals regarding appropriate corporate activity. We integrate institutional theory and research on corporate political strategy to develop a political dependence model that explains (a) how different types of dependency on the government lead firms to issue corporate social responsibility (CSR) reports and (b) how the risk of governmental monitoring affects the extent to which CSR reports are symbolic or substantive. First, we examine how firm characteristics reflecting dependence on the government-including private versus state ownership, executives serving on political councils, political legacy, and financial resources-affect the likelihood of firms issuing CSR reports. Second, we focus on the symbolic nature of CSR reporting and how variance in the risk of government monitoring through channels such as bureaucratic embeddedness and local government institutional development influences the extent to which CSR communications are symbolically decoupled from substantive CSR activities. Our database includes all CSR reports issued by the approximately 1,600 publicly listed Chinese firms between 2006 and 2009. Our hypotheses are generally supported. The political perspective we develop contributes to organizational theory by showing (a) the importance of government signaling as a mechanism of political influence, (b) how different types of dependency on the government expose firms to different types of legitimacy pressures, and (c) that firms face a decoupling risk that leads them to be more likely to enact substantive actions in situations where they are likely to be monitored.

SANY: Going Global

April 17, 2012, was a special day for SANY Group and for its founder Liang Wen'gen. Headquartered in Changsha, SANY Group had transformed itself in two decades from a small welding material factory in 1989 to a leading global construction equipment manufacturer with 5 industrial parks in China; 5 R&D and manufacturing bases in America, Germany, India, Brazil, and Indonesia; and 21 sales companies worldwide. SANY Heavy Industry Co., Ltd. (SANY), SANY Group's major subsidiary, engaged in the construction equipment business and was number six on International Construction's 2012 Yellow Table, a ranking of the world's largest construction equipment manufacturers.

Konys, Inc.

Lee, Deishin, and Tunay I. TuncaHarvard Business School Case 613-065

This case describes the sourcing policy for a consumer electronics company. The company must decide how to structure contracts with their supplier-using a purchase contract, an option contract, or combination of the two. The company can also buy from the spot market. The students use a spreadsheet model with Monte Carlo simulation to analyze the contracting options.

J.C. Penney's 'Fair and Square' Pricing Strategy

Ofek, Elie, and Jill AveryHarvard Business School Case 513-036

As a he gets ready to release second quarter 2012 results, Ron Johnson, the new CEO of department store J.C. Penney, is reconsidering the dramatic changes he initiated for the business model and brand image of his company. A new pricing scheme he put in place in February, dubbed "Fair and square," was a central component of the new strategy. The scheme initially had three pricing tiers and eliminated typical sales promotions in an attempt to simplify the shopping experience for consumers, thus moving J.C. Penney off its previous high-low pricing practice. Other components of the new strategy included a new store layout, the inclusion of several well-known brands, and special lines designed by well-known designers. However, troubling first quarter results that continued into the summer months seemed to indicate that J.C. Penney shoppers, accustomed to receiving JCP Cash coupons and circulars advertising the week's specials, were slow to embrace the new pricing format and began leaving the retailer in droves. Under enormous pressure to turn things around as the all-important back-to-school and holiday shopping seasons were imminent, Johnson decided to make adjustments to the initial pricing scheme that were set to go into effect August 1. Were these changes enough to turn things around? Should Johnson stay the course on the other elements of his repositioning efforts? Is Johnson's experience in setting up Apple stores helping or hurting him as he tries to achieve his goal of making J.C. Penney "America's favorite store"?

Great Western Hospital: High-risk Pregnancy Care

Great Western Hospital (GWH) is a community hospital in Wiltshire, South West England, and one of England's largest maternity providers, responsible for delivering over 9,000 babies per year. The case discusses the efforts of Dr. Harini Narayan, consultant obstetrician, and gynecologist, to reorganize antenatal care delivery at GWH. Rather than treating high-risk pregnancies as a homogeneous group, Dr. Narayan pioneered the development of eleven condition-based, high-risk clinics led by dedicated multidisciplinary teams of physicians, midwives, and nurses. The case profiles the Multiple Pregnancy Clinic in particular and its impact on perinatal indicators and outcomes.

Colbún and the Future of Chile's Power

Reinhardt, Forest, and Shon R. HiattHarvard Business School Case 713-047

This case is about Colbún, Chile's second largest electricity generator, which is facing significant uncertainty regarding the cost and availability of alternative energy sources. Problems with the contracted supply of natural gas and the volatility of oil prices, coupled with pressure from collective activists, force Colbún to revise its business strategy and its sourcing mix. The case also deals with the pros and cons of various energy sources in view of their perceived environmental impact. As the company's CEO, Bernardo Larrain Matte has to take all these different considerations into account when planning Colbun's future, especially in the light of new opportunities and challenges posed by global climate change. The case analyzes the operations of Colbún to illustrate the complexities associated with conducting business under the influence of global energy markets, political uncertainty, and environmental activism.

Chevron: A Stranded Asset?

Serafeim, George, Robert G. Eccles, and Phillip AndrewsHarvard Business School Case 112-065

Oil giant, Chevron, faced numerous challenges on environmental, social and governance (ESG) grounds in the first decade of the 21st century, including some major lawsuits and actions by NGOs. The case describes those challenges and raises questions about what is the optimal response on the part of the company in order to ensure future growth and profitability, and how those challenges are going to affect the future competitiveness of not only Chevron but of the whole oil and gas sector.